IPOs: Playing the Green Card

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In these uncertain times, firms preparing for an initial public offering are shining themselves up by all available means. Recent Securities and Exchange Commission filings suggest one relatively new strategy: accentuate sustainability. According to a PricewaterhouseCoopers (PwC) report that looked at more than 120 filings from last year, almost 9 in 10 disclosed some level of detail regarding sustainability. More notable is that only one-third of those disclosures were mandated by regulation.

The focus of the disclosures varied by industry. In the industrial sector, companies documented the environmental impact of their emissions, the sustainable attributes of their products, and their competitors’ focus on sustainability. Consumer companies tended to address concerns about natural disasters, but a third also disclosed their energy-efficiency and related “green” programs. In business-services, more than a quarter of firms did not include any sustainability disclosures, and the ones that did mostly discussed the risks of natural disasters.

Some of the most energy-intensive industries, such as transportation, disclosed the direct business impact of their sustainability efforts. One helicopter manufacturer pitched its products as environmentally friendly alternatives. Another energy-efficient company showed how it was able to boost capital by selling its zero-emissions credits.

Despite the breadth of these disclosures, PwC says that firms are still taking baby steps toward creating IPO value through sustainability. But in one sense there has been a notable shift, according to Scott Gehsmann, partner in PwC’s capital-markets advisory practice. “We’ve seen our dialogues turn from a push, with us providing advice and coaching [on the value of sustainability], to a dynamic that’s becoming more of a pull,” Gehsmann says. “Companies are beginning to address this topic far in advance of an IPO.”

To some degree, companies contemplating an IPO may be taking a cue from the shareholders of firms that are already publicly traded. In the 2011 proxy season, shareholders filed a record 109 resolutions pertaining to climate change and other sustainability issues, according to investor group Ceres. Perhaps in response to the increasing pressure from investors, some companies are linking executive compensation to sustainability metrics, while others have disclosed the percentage of revenue they attribute to sustainable products and services.